Fidelity is best known as an investment platform, so you may be surprised that you can access CDs from this firm. In fact, Fidelity offers brokered CDs. These differ from traditional CDs as while they are issued by banks, they are only available to brokerage customers.
Fidelity CDs are available as new offerings and via a secondary market, but you can access products with different rates and terms.
Since these are a little different to traditional bank CDs, we’ll delve into these products in more detail to help you decide if Fidelity CDs could be a good option for you.
Fidelity CD Rates
Fidelity CDs are available with terms of three months up to 5 years, so you can lock in a rate according to your requirements and investment strategy. Generally, longer-term CDs offer higher yields, but there are some exceptions. Also, Fidelity offers excellent options for CD laddering.
All Fidelity CDs are FDIC insured, so you’ll have up to $250.000 of protection per account owner, per institution. It may also be able to increase this coverage, since Fidelity offers CDs from hundreds of banks and each will provide FDIC coverage up to the FDIC limits. So, you can expand your protection by combining different bank CDs.
Overall, the Fidelity offers some of the best CD rates as of December 2023, but keep in mind the process of investing in brokered CDs is a bit different than how it works with your bank.
Brokered CD vs. Bank CD: How They Compare?
A brokered CD is a certificate of deposit (CD) that is purchased through a brokerage firm or other financial intermediary, while a bank CD is a CD that is purchased directly from a bank. While both brokered CDs and bank CDs are FDIC-insured up to $250,000 per account holder per bank, there are some differences between them.
One key difference is the availability of options. Brokered CDs often offer a wider range of CD options from various banks and credit unions, including CDs with higher interest rates and longer terms than what is typically available at a single bank. This can be beneficial for those who are looking for more customized CD options or higher yields.
Another important area to consider in how brokered CDs work is that, generally, there is a secondary market. This means that you may be able to liquidate your funds before the CD matures. However, you will incur a trading fee from Fidelity and the CDs are subject to a mark down, as newly issued CDs tend to garner more interest.
Are Fidelity CD Rates Competitive Compared to Bank CDs?
Since Fidelity offers CDs from hundreds of different banks, the brokered CDs offer very favorable rates even when compared with online banks. It offers one of the highest rates for 6 months CDs as well as 3-month CD rates.
Online banks are a little different since they don’t have to cover the costs of maintaining a physical branch network. This means that they typically offer the most attractive rates. Since Fidelity offers CDs from hundreds of different banks, the brokered CDs offer very favorable rates even when compared with online banks.
The current average Fidelity CD rates are several times higher than the national average, making them highly competitive. However, there are some costs which may offset these higher rates.
New issue CDs have a minimum deposit requirement of $1,000 and they are issued in $1,000 increments, which differs from traditional CDs, which usually allow you to deposit any amount over the minimum requirement. There are no brokerage fees for new issues, but if you purchase a Fidelity CD on the secondary market, a trading fee applies.
CD APY Range
4.00% – 5.20%
First Internet Bank
4.18% – 5.35%
4.45% – 5.50%
0.01% – 5.25%
4.30% – 5.30%
PenFed Credit Union
2.00% – 4.35%
Alliant Credit Union
4.27% – 5.30%
4.00% – 5.30%
4.25% – 4.75%
4.10% – 5.30%
3.00% – 5.00%
2.00% – 5.20%
0.30% – 5.00%
3.00% – 5.15%
0.05% – 5.65%
Connexus Credit Union
3.51% – 4.85%
4.70% – 5.67%
5.05% – 5.50%
5.52% – 5.65%
4.50% – 5.75%
0.05% – 4.50%
1.49% – 5.26%
2.25% – 5.50%
2.75% – 5.50%
1.00% – 5.50%
4.00% – 5.65%
Fidelity CD Rates vs Fidelity Savings
Currently, Fidelity does not offer savings accounts, so you must compare the Fidelity CD rates with saving account options at online and traditional banks in your area. You are likely to find that Fidelity CDs offer a higher APY, but there are reasons for this.
Firstly, savings accounts allow you to deposit and withdraw funds as and when you like, with the exception of high-yield savings accounts, which limit the number of withdrawals you can make per month. This means that you’re not locked into a specific term. However, the downside of this is that the rates are subject to change.
While a CD allows you to lock in an attractive rate for the entire term, saving account rates are subject to change. So, when the base rate drops, you’re likely to find that your savings account APY will quickly follow the trend.
Fidelity has a history dating back over 75 years, as it was established in 1946 and it continues to be managed by the family of founder Edward Johnson II, who retained 49% ownership of the company. Fidelity claims to have helped over 40 million people work towards their financial goals and aim to offer innovative investment solutions to help personal customers and business owners.
Today, you can use Fidelity to access a variety of investment products including brokered CDs, bonds, ETFs, and funds, so you can incorporate brokered CDs into your overall investment strategy.
Fidelity offers brokered CDs, which means that you can liquidate without incurring the early withdrawal fee, you may incur with a traditional bank CD.
However, you will be selling your CD on a secondary market, so you’ll incur a trading fee and there are no guarantees of a settlement cost, since new issue CDs tend to have a higher demand.
Fidelity provides access to CDs from hundreds of banks, so there are no advertised promotions, but you should be able to access some of the best deals in the marketplace.
No, the Fidelity CDs do not auto renew. Upon maturity, the funds will be released into your settlement account. You can then choose to withdraw or reinvest the funds as you prefer.
Typically, the interest on Fidelity CDs is not compounded. If you have a short term CD, it will be added to your account upon maturity. Longer term CDs may offer interest payments on a monthly, quarterly or annual basis.
There is no early withdrawal penalty as such. Instead you need to arrange for your CD to be sold on the secondary market.
Fidelity will aim to broker a sale for you, but the amount you receive will depend on the current market and demand. You’ll also incur a trading fee for use of the secondary market.